Dollar sets new all-time record lows against British pound and euro

At 0750GMT, the British currency was quoted as US$2.0513 after trading as high as US$2.0548 earlier in the day.

In the meantime, the euro hit a record high against the dollar Wednesday in Asia amid renewed speculation U.S. subprime loan woes could further dent the value of the American currency.

The euro settled at US$1.3822 after rising to a record high of US$1.3834, up from US$1.3784 Tuesday. The U.S. dollar was trading at 121.72 yen midafternoon, down from 122.38 yen the previous session in New York.

The U.S. dollar's decline against the yen came in a chain reaction of dollar sales.

Earlier in the day, The Wall Street Journal reported Bear Stearns, a New York-based securities firm, as saying two hedge funds it manages that have made big bets on subprime mortgages are now almost worthless.

The report triggered nervousness among Tokyo players, who now see the U.S. currency as likely to extend losses versus other major currencies due to a possible downturn in U.S. stocks.

Subprime-related issues could drive down share prices in the housing and financial sectors, said Michiyoshi Kato, a senior trader at Mizuho Corporate Bank.

"In the worst case scenario, a U.S. stock plunge may lead to sinking global stock markets, and growing risk aversion could keep weighing on the dollar," Kato said

Others said the U.S. currency could also suffer because the subprime issue might lead to a drop in U.S. long-term interest rates.

"Many players appear concerned about whether the subprime loan woes will dampen hopes for rising U.S. interest rates boosted by recent high energy prices," said Hiroshi Imaizumi, a senior dealer at Resona Bank.

Unless good news for the dollar emerges, the currency "will remain under great disadvantage," he said.

Looking ahead, market participants are paying attention to Federal Reserve Chairman Ben Bernanke's speech to Congress later Wednesday for clues on the future course of U.S. housing markets and the state of the economy.

Against other regional currencies, the dollar was mostly higher, rising to 16,134 Vietnamese dong from 16,130 the previous day, and to 45.360 Philippine peso from 44.975.